Intraday Market Thoughts

Archived IMT (2010.08.10)

by Ashraf Laidi
Aug 10, 2010 20:45

USDX DROPS As Feds message was not lost in translation as it announced a fresh dose of treasury purchases from the principal payments of Agency securities. The resulting selloff in the US dollar and bounce in equities reflected the markets clear understanding that QE2 has been unveiled.

======= THE Yin Yang relation of the YEN-YIELDS IS ON A TEAR as the low yielding Japanese currency benefits from the ongoing damage in yields on a full-fledged purchase of US government securities. This is a clear departure from the unusual relationship, whereby the yen decreases during improved equities ====================Although equities have improved on the Feds willingness to adopt fresh liquidity injections, it remains to be seen whether the market has gone too far in shrugging the Feds clear economic downgrade. ===========15 months after its initial announcement to purchase US treasuries, the Fed recycles Agencies principal payments into new treasury securities. Such outright purchases of treasuries could extend the yen's WIN-WIN scenario, whereby falling yields as well as falling stocks are both boosting the currency.=====SP500 has yet to close above its 100-day MA, currently at 1125. Watch Ashraf on CNBC-Europe Wednesday at 5:10 am GMT, 6:10 BST.


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